The structural unemployment rate is 3.2 percent,the frictional unemployment rate is 1.8 percent,and the current unemployment rate is 6.3 percent.The economy is in
A) a recessionary gap producing less than Natural Real GDP.
B) an inflationary gap producing more than Natural Real GDP.
C) long-run equilibrium.
D) an inflationary gap producing Natural Real GDP.
E) a recessionary gap producing more than Natural Real GDP.

Question

Quizplus · Accepted Answer

The current unemployment rate (6.3%) is higher than the sum of the structural (3.2%) and frictional (1.8%) unemployment rates, which together make up the natural rate of unemployment (5%). This indicates the economy is producing less than its Natural Real GDP, signifying a recessionary gap.

The Structural Unemployment Rate Is 3